Crypto mining is considered a more lucrative way of owning cryptocurrencies than purchasing them because of its several advantages. These advantages include adaptability to fluctuations in the market, diversity in mining, lower transaction fees, etc.
Due to these reasons, the popularity of cryptocurrency mining has grown considerably over the years. More and more people are investing in mining machines, softwares, and data centers to start their journey. Also, several blockchain platforms are offering crypto mining services to miners. However, amidst all this hustle, people tend to forget about the importance of a mining pool.
As crypto-mining involves solving complex computations found in a mining pool to mine cryptocurrencies, it is safe to say mining pools are essential. However, different mining pools might use different protocols that directly affect mining efficiency. So it is vital to choose the right mining pool to maximize your output and minimize your costs. Here are few things to consider when choosing a mining pool:
Infrastructure Compatibility
There are many mining machines available in the market, but not all are compatible with the mining pools. Similarly, some mining softwares will work better on certain mining pools than others. Also, some mining pools have criteria to allow mining on them, such as specific high-end mining machines, minimum internet bandwidth, verification processes, etc.
So it is essential to understand your and the mining pool’s requirements before joining one.
Transparency
To ensure safety and efficiency, mining pools must be transparent with their protocols. This transparency will help the miners to understand the hash rate, the complexity of the computations, payout procedures, etc., of the mining pool. Some mining pools have a detailed dashboard where miners can see all the transactions happening in the pool.
Payout Threshold and Frequency
Some mining pools have higher payout thresholds and frequency. This means that the users will only receive payouts when they have mined a pre-decided amount of tokens. While higher thresholds might be beneficial for high-end mining machines, low-end hardware will not benefit from it. As they produce lower hash rates, it will take them longer to reach the threshold, which results in late payouts.
Pool Stability
Pool Stability is one of the crucial factors that determine the reliability of the mining pool. The pool must have robust rebasing mechanisms to automatically adjust to the market fluctuations, as otherwise, the miners can suffer huge losses.
Also, these pools should not be vulnerable to DDoS attacks or hacks and must have robust security protocols in place.
Fee Structure
While some mining pools charge a fee for mining, others do not. However, some “free mining pools” might ask for regular donations. It is essential to study the fee structure of the mining pool in detail because it will directly affect your payouts.
Size
While the size of the pool does not directly affect the pool’s efficiency, it affects its reliability. Large pools usually demonstrate the pool’s reliability and trustworthiness. Also, as the larger pools have more computing power, they can find blocks to mine relatively easier than small pools.
However, if most miners choose large pools, it will promote the centralization of the crypto mining industry, which goes against the fundamental principle of the crypto world. Miners should instead select a large group of small pools then a small group of large mining pools to keep the essence of decentralization intact.